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IN TODAY’S COMPLEX SOCIETY, estate planning can be more complicated than ever. Many families are “blending,” as couples divorce, remarry and share custody of children from different relationships.
Each time a change occurs in a primary relationship, whether marriage, death, birth of a child, and certainly, divorce, it is time to re-evaluate your estate plan.
In divorce, timing can be an issue in estate planning. Must you wait until after your divorce is final to change your will, trust and other estate planning documents?
Yes and no. Attempting to transfer marital assets in and out of a revocable living trust while the divorce process is ongoing can be a problem and a source of dispute between divorcing couples.
However, in many cases, the separation and divorce process can last over a period of years, and divorcing parties may want to make changes to their estate plans during that time, particularly if minor children are involved. Parties may wish to change beneficiaries from their soon-to-be-ex-spouse to another party, like a parent, sibling, or a child.
What should you do if marital assets have not yet been divided, but you want to change beneficiaries?
One solution is to create a will to bridge the gap between the time of separation and divorce. If minor children, who may not directly inherit, are involved, the will should include a testamentary trust—at trust that arises upon the parent’s death. At the time of the parent’s death, whatever assets the parent owns then would transfer to the trust and an appointed trustee would manage the trust on behalf of the beneficiaries (in our scenario, the minor children).
In addition, it is important to address those assets that require named beneficiaries such as life insurance policies. Most people are not aware that beneficiary provisions on bank accounts, life insurance policies, retirement accounts, investment accounts and the like trump the directives of estate planning documents like wills and trusts. Thus, if you have named your ex-spouse as the beneficiary of your life insurance policy and do not substitute another beneficiary, regardless of what is stated in your will, your spouse may inherit the proceeds of the policy.
In Florida, a statute recently was enacted which may automatically disinherit an ex-spouse if the decedent has not yet changed the designated beneficiary. However, it is wise to just address the issue directly by making the changes you need to make and not leaving it up to the courts.
In the case of retirement accounts, like 401(k) accounts, a spouse may need to complete paperwork relinquishing his or her rights to inherit.
Many issues could arise regarding estate planning during separation and divorce. It is a good idea to discuss your particular situation with your divorce attorney so she may advise you. Whatever you do, do not start moving assets around until you have consulted with your attorney about the impact on your divorce case as well as your estate plans.
For almost 30 years, Sandy Ambrose has guided clients through the divorce process. To schedule an appointment to discuss the particulars of your case, please contact Sandra K. Ambrose today.